Investment avenues are slowly becoming saturated with general market trends. Today, more investors are interested in Thematic Systematic Investment Plans (SIPs). This plan is unlike regular SIPs since it focuses on specific sectors or trends for long-term growth, such as electric vehicles, fintech, or artificial intelligence.
By investing in thematic funds, investors can align their portfolios with future megatrends while benefiting from systematic, disciplined investing.
What is a thematic SIP?
A thematic SIP is an investment style in which an investor assigns a particular amount of money to sector or industry mutual funds or exchange-traded funds related to a certain theme. SIPs are supposed to capitalise on long-term economic, technological, or demographic trends.
Why invest in a thematic SIP strategy?
Thematic funds track sectors of several industries aligned under a wide theme, as opposed to sector funds, which track one particular industry, like banking or pharma. Hence, here’s why you should invest in a thematic SIP strategy.
- High-growth industries
Thematic investment will make an investor bet on high-growth potential industries like EV, fintech, and AI that will form the future’s economy.
Example: The global electric vehicle market will grow at 13.7% CAGR from 2023 through 2030.
Early investments in such trends locks in long-term wealth-creation opportunities.
- Systematic and disciplined investing
SIPs eliminate the need to time the market, thanks to which you can avoid lump-sum investments at market peaks. Because of SIPs, an investor gets the benefit of rupee cost averaging and compounding over long periods when investing in a thematic fund.
- Diversification across growth-oriented companies
Thematic SIPs provide investment exposure to the companies within a specific trend rather than betting on individual companies. For instance, an AI-focused fund will include tech giants, chipmakers, and firms in automation, thereby providing balanced exposure to the AI revolution.
How to design a thematic SIP?
Step 1: Identify long-term trends
Analyse the trends that will create the future around the globe. Some of the most prominent near-term potential themes are:
- Electric vehicles and clean energy: Names like Tesla, Tata Motors, and BYD.
- Fintech and digital banking: Payment gateways, blockchain, and neobanks.
- Artificial intelligence and automation: AI software, cloud computing, and semiconductor companies.
Step 2: Choose the right thematic mutual funds or ETFs
Find out which mutual funds or ETFs are available to invest in these themes. Evaluate:
- Track record of performance.
- Expense ratios and management fees.
- Fund manager expertise.
- Diversification in the theme.
Step 3: Invest via SIPs
- Investment frequency: Monthly or quarterly SIPs aligned with cash inflow.
- Allocation percentage: Spread the same across several themes to keep an optimal balance on risk.
Step 4: Track the strategy
Thematic investments are trend-related. So, constant market situation monitoring and fund performance are always necessary. If the theme is losing steam, one can consider re-allocating to a high-performing trend.
Who should invest in thematic SIPs?
- Growth-oriented investors- Those willing to take on higher risk for potentially higher returns.
- Tech-savvy investors- People who understand and believe in emerging industries like EV and fintech.
- Long-term investors– Those who are willing to invest 5+ years to ride out of market fluctuations.
- Diversified portfolio holders- Investors who already have traditional SIPs and are looking to add high-growth opportunities.
Conclusion
Thematic SIPs enable investors to invest in high-growth industries such as those provided by EVs, fintech, and AI, where investors eventually settle for long-term megatrends. They are certainly riskier than traditional SIPs but with better return potential in terms of the future that technology and innovations bring.
A thematic SIP is the most effective way to maximise success because it researches themes, chooses strong mutual funds or ETFs, and systematically invests for long-term gains.
